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WorksheetsAudit - Revisions Basics
Total questions: 67
Worksheet time: 1hrs 6mins
What must the auditor state an opinion on...
true & fair view
professional scepticism
Ethical principles, ISA's and professional scepticism are...
general principles for an auditor to follow
what the auditors must state an opinion on
Which of the following is a benefit of a statutory audit?
investors are more able to rely on the information
management are less likely to commit fraud
the business are more able to raise finance
management can verify that their system are sound
all of the above choices
Select the right order of the system.
Sales Order, Quotation, Goods Received Note, Invoice, Receipt
Quotation, Sales Order, Invoice, Goods Received Note, Receipt
Quotation, Sales Order, Goods Received Note, Invoice, Receipt
Invoice, Sales Order, Goods Received Note, Quotation, Receipt
What sort of evidence is needed for a reasonable assurance engagement?
Sufficient
Reasonable
A Quotation has been made ………… the sales order placed.
before
after
Which of the following is a drawback of statutory audit?
Many controls can be overridden by management.
Not all transactions are checked.
The opinion is based on evidence, often provided by management.
Many businesses with a recent clean audit report have subsequently gone out of business.
All of the choices
Which of the following is a general principle for the auditor to follow?
Compliance with International Standard on Auditing
Compliance with applicable ethical principles
Keeping an attitude of professional scepticism when planning and performing the audit
1.Auditors are required to express an opinion as to whether the financial statements give a ‘true and fair’ view.
2. An audit is a type of reasonable assurance engagement.
both statements are true
both statements are false
statement 1 is false
statement 2 is false
Poor quality evidence is derived from...
Management
Auditor
Third party
____________means that in their opinion the subject has been prepared in accordance with the criteria.
external audit
negative assurance
reasonable assurance
none of the choices
Control deficiencies are normally provided to management - how?
Letter to Management
Letter to Auditor
Letter to Service Organisation
What sort of assurance does a reasonable assurance engagement give?
High
Low
Which of the following is a reason why a non statutory audit is undertaken?
Making a sale of the business easier
Providing assurance to the owners over financial results
Making accounts more acceptable to Tax authorities
Providing assurance to those financing the business
The auditor may ask management to confirm in writing matters which have arisen during the audit.
True
False
1.If Inherent & Control risk are judged to be high, then to minimise overall audit risk, the auditor must attempt to minimise detection risk.
2. The auditor concentrates on inherent risk to minimise the audit risk.
both statements are true
both statements are false
statement 1 is false
statement 2 is false
Do ISA's sometimes specifically request a management representation?
Yes
No
As a general rule, the smaller the tolerable misstatement or rate of deviation, the greater the required sample size.
True
False
When creating a management letter in the exam - the format of the structure will have 3 things..
Deficiency, Consequence and.... ?
Effect
Recommendation
If not a going concern then a company uses the break up basis for their accounts..
Here, inventory is measured at ?
net realisable value
cost
Generally should you give a loan to a client?
yes
no
A professional accountant should act in a manner consistent with the good reputation of the profession.
true
false
1.Material items could be large transactions or significant events.
2. Materiality is important to the auditor because if a material item is incorrect, the financial statements will not show a ‘true and fair view.’
both statements are true
both statements are false
statement 1 is false
statement 2 is false
What is step 2 of procedures auditors should have for dealing with threats to independence and conflicts of interest?
Evaluate what level of risk they pose
Check that necessary safeguards are in place
Which risk is under the influence of the auditor?
Detection
Control
Which analytical procedure would be the most likely at the planning stage?
Confirming balances with predictions based on previous patterns
Checking receivables listing for overdue amounts
These test the systems in place by determining whether the controls over it are sufficient or not.
test of control
substantive procedures
analytical procedures
none of the choices
Analytical procedures is an appropriate test for auditing payroll.
true
false
Which of the following is most likely to improve the response rate of the receivables confirmation letter?
Break down the balance into a list of invoices for the client to check
Use only large owing customers
Use only small owing customers
Efficiency of the audit team, can be improved at the planning stage by...
Focusing on risk areas
Highlighting the importance of the audit
Allocating more than enough recources
What do you call the risk that the auditor expresses an inappropriate audit opinion when the financial statements are materially misstated?
inherent risk
risk assessment
audit risk
control risk
In going concern review the auditor will:
Look at the ______________ of the industry
past performance
economic conditions
In terms of bank and cash - a strong internal control is a bank __________ ?
reconciliation
confirmation
1.Time spent planning the audit to ensure it is carried out efficiently will reduce the time taken and thus the cost.
2.The auditor will want to ensure that the correct team is in place to conduct the audit, they are working efficiently and that work is focused on material areas of risk and potential problem areas.
both statements are true
both statements are false
statement 1 is false
statement 2 is false
Is ensuring daily back ups of information systems an example of an application control or a general IT control?
Application control
General IT control
If the advertisement implies that the Audit firm can offer a ‘better’ audit opinion than other firms, it is ......
Lacking of integrity
Professional
Could the contingent fees be used for corporate finance services offered to non-audit clients?
Yes
No
The IASB has the power to enforce compliance with IASs/ IFRSs. Is this statement?
True
False
1.A narrative note is a written description of the system showing what happens and the controls operating at each stage.
2.Narrative notes can become too much, especially if the system is complex. This is one advantage of narrative note.
both statements are false
both statements are true
statement 1 is false
statement 2 is false
Continuous counting helps avoid the potential disruption of an annual count at the year end of the reporting period.
True
False
Do substantive tests always get evidence from the client accounting system?
Yes - as this is the best evidence
No - sometimes direct from 3rd parties
Does Going Concern require judgement?
Yes
No
Does the auditor have to use substantive tests?
Yes for every material balance
Not all material balances
This is when the auditor accepts the error. For example finding two errors out of 1000 tested might be ignored.
risk assessment
materiality
tolerable error
none of the choices
In preparing a management letter, the auditor should write the consequences is the control weaknesses were not corrected.
True
False
____________uses random selection to select samples and then assesses the results using probability theory
statistical
non statistical
none of the above
The form and content of the accounts of limited liability companies are PRIMARILY regulated by:
International Financial Reporting Standards (IFRSs)
National legislation
International Accounting Standards (IASs)
None of the above
What are the objectives of the IASB?
To enforce IFRSs
To issue IFRSs
Net assets of any business acquired should be measured at what value?
Fair value
Book Value
Documentation enables an experienced auditor with no previous connection to the audit to understand...
Procedures, evidence, significant matters and ?
Completeness of work
Who performed the work
The time taken
Judgements used
1. Collusion may occur even if the internal controls are strong.
2. The specific circumstances of the entity make some controls unworkable or be manipulated in practice by those involved in the system.
both statements are true
both statements are false
statement 1 is false
statement 2 is false
Testing for completeness is easier or harder than testing for existence?
Harder
Easier
One of the substantive test for prepayment auditing is reviewing the list for omissions.
What will the auditor use or based on for this test?
Knowledge of client business
A standard checklist
Third party confirmations
Prior year's working paper
Are analytical procedures used only at the planning stage?
Yes
No
If the client is a bank, and a member of the audit team has a loan from them - is this a problem?
Yes
No
Is ensuring that items are within a certain range an example of an application control or a general IT control?
Application control
General IT control
Goods received before year end - should be shown in inventory and as a ________ ?
Liability
Receivable
Cash
Equity
Research costs should be shown as an intangible asset.
True
False
The advantage of flowcharting is that it makes it easy to view the system as a whole because it is presented in one diagram.
True
False
The _______ sets out the scope, timing and direction of the audit.
risk assessment
engagement letter
audit strategy
none of the choices
Internal controls will have a direct effect on audit risk.
true
false
Who sends out the bank confirmation letter?
Auditor
Management
1.All misstatements found must be communicated to those charged with governance.
2.If management amend material errors, then the auditor will issue a qualified report.
both statements are true
both statements are false
statement 1 is true
statement 2 is true
Which of the following is a substantive test for payables-trade?
check arithmetical accuracy
get a list of balances
check a sample from supplier statements to listing
all of the choices
The planning section will be found in which file?
Current
Permanent
This type of modified but still unqualified report draws attention to fundamental issue in the financial statements.
emphasis of matter
other matters
adverse opinion
none of the choices
If management have acted on recommendations made by internal audit, then the external auditor may choose to rely on some of the work of internal audit.
True
False
